Chinese smartphones: Looking for good value

Source: Meizu

Browsing through catalogues of cellphone network operators and retailers shows a growing number of previously unheard-of brands that are beginning to compete with Apple and Samsung in the high-end market, even among SA's brand-conscious consumers.

The more familiar brands are Huawei, ZTE, Lenovo, Xiaomi, Hisense and TCL Mobile, which is behind the revival of Alcatel. TCL also has its own branded handsets.

The latest entrant – a new brand for SA – is Meizu, which introduced its smartphones to SA last year.

Chinese-made devices have highly attractive features and most offer value for money. Their main target is medium- to low-end buyers and entry-level handsets are priced around R2,000.

Low prices have accelerated smartphone adoption in SA. Cellphone network operators have recorded a double-digit increase in smartphone usage, resulting in growth in data revenue. According to the International Data Corp (IDC), low-priced smartphones (costing less than $100) account for more than two-thirds of SA's Android phone sales.

"This space has evolved after top-end sales became well-established in the market courtesy of the country's substantial postpaid segment, a rare feature of the operator environment in Africa," it said in a report released in September 2016.

World Wide Worx MD Arthur Goldstuck says the main factor driving the uptake of Chinese handset brands is value for money, rather than low cost in itself. The high-end features available on mid-range phones make them viable alternatives to the big brands, for which the cost is often two to three times that of the economy brands.

MTN SA's GM for pricing, research and intelligence, Jay Chetty, says the popularity of these devices is growing – largely because of their costs – as they enable more South Africans to get into the smartphone environment.

"The Huawei brand is gaining credibility," says Chetty. "It is starting to tap into the high and medium value segment."

Between 11% and 15% of smartphones running on MTN's network are from Chinese brands. Goldstuck believes South Africans are very brand conscious, mainly when they are paying a premium, but when they simply want an affordable option the brand becomes less important than what you get for your money.

He says Huawei is the big challenger to Samsung's market dominance. It displays many of the same characteristics, strategies and attitudes Samsung did when it was still an up-and-coming smartphone player. Alcatel has the potential to dominate the low end, where it has been successful, but has not yet broken into the high end.

Not all Chinese brands are succeeding here. Goldstuck says Xiaomi has made a huge impact in some markets, but its online marketing model has required substantial adaptation for the African market.

He says it may not be able to achieve the same scale as Huawei. "ZTE seems to have little interest in deepening its role in the local handset market. Other Chinese players like Meizu and Oppo remain unproven in this market."

The IDC says the share of Chinese brands in the smartphone market has exceeded 20% of total units by the end of 2016. Besides the product mix, currency challenges and macroeconomics factors in SA are favouring economically priced phones from China. These brands are no longer seen as "cheap and low quality" but rather as better and preferable to the overpriced ones.

The SA smartphone market is driven by contracts. Apple's iPhones are big players only at the top end of the market, as the handsets are unaffordable for the mass market. However, great efforts are made to match its design and technology for the aspirational value it brings, says Goldstuck.

Vodacom's own branded handsets are gaining traction. Vodacom's Davide Tacchino says launching a new device is not easy. "We look at the price and quality . and there are plenty of new brands in the market, but some of them are not able to match our requirements."

Source: Financial Mail